yes, typically funds won from a bonus cannot be withdraw until the rollover requirements have been met. In this situation is looks like although you lost the bonus that having not made a further deposit prior to then winning money that its still linked back to the bonus which is likely why they indicated about the rollover amount.
Seems like an unfortunate situation to have but from their point of view they gave you a bonus, you never made a deposit and now have 1k in your account thus its "technically" money earned from an account last seeded via the bonus they provided ..... and all funds could be locked to the bonus rollover requirements. In your case it seems they are allowing you to cashout 200$ but must essentially giveup the additional 177 (probably based on a prorated requirements being met for the rollover).
It sounds like you were killing it there doing something over the last few weeks to turn 28$ into $1100 so the best approach you should have taken, and probably in hindsight was to keep grinding poker and maybe throw a 25$ sportsbet every once in a while to meet the requirements while still building the br. It might be frustrating but they are a reputable site and it sounds like they are simply following what is likely laid out in the T&S agreement you accepted when accepting their free sportsbet or whatever the 25$ could be used for.
In fact they are celebrating a 20 year anniversary on Monday the 18th for the first online sportsbet ever made which was obv with them.
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aka. BD2 - CertifiedPokerAddict, CardsChatAddict
Never give up, Never surrender, Grind until you bleed .... BD2 ;)
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